Cardlytics ($CDLX): Why I Bought More (Research Notes Updates #140 - #144)
New notes on the drawdown of the line of credit, updated liquidity analysis, future share count, and future value per diluted share.
Market Cap as of 3.20.2023: ~$3.16 / Share x 33.6M Shares ~ $106M Market Cap.
Given the amount of new and important information coming out regarding CDLX, and given the all-time-low stock price, I have been adding a lot of thoughts and analysis to the CDLX Research Notes, including:
Updated liquidity analysis (with recent LOC drawdown + earnouts + dispute)
Future diluted share count (with earnouts + dispute + if equity raise)
Future value per diluted share (vs today)
Analysis on the $30M drawdown of the LOC (interest payments, accounts receivable limits, Bridg earnout limits, etc.)
and more
This analysis is what led me to buy more last week and again today at the open, and I will likely continue to buy more.
While I prefer to wait longer between update emails for the notes, I want to make sure I deliver timely information to all of you with access to the Research Notes (especially given the all-time-low stock price).
Also, given the importance and timing, I also added an exclusive video within the notes discussing the updated liquidity analysis, future share count, and future value per diluted share. This video is included in the first update notes at the very bottom of this post.
The CDLX Research Notes Updates
(These notes + the video are at the very bottom of this post)
All of the following notes are under "Q4 2022 Earnings: Notes and Thoughts After the Call”.
For convenience, I copied over the corresponding sections of the Research Notes and pasted them at the end of this post.
Or you can use this direct link to the notes and the section containing these updates.
Note, I do tweet out when I make an update to the Research Notes. Therefore, if you want more real-time updates, follow me on Twitter.
The order below matches how I copied them to the end of this post for you to read. I wanted #144 on top since it summarizes many different important points. The rest is then in the order of when it was posted.
CDLX Research Notes: Update #144
Added on 3.19.2023
Updated liquidity analysis (with recent LOC drawdown + earnouts + dispute)
Future diluted share count (with earnouts + dispute + if equity raise)
Future value per diluted share (vs today)
Includes video discussing this section
CDLX Research Notes: Update #140
Added on 3.14.2023
Thoughts on the partial drawdown of the line of credit
And what else the drawdown could mean (supported by the analysis in update #144, with the updated liquidity analysis)
Thoughts on CDLX minimizing exposure to any single financial institution and maximizing FDIC insurance
CDLX Research Notes: Update #141
Added on 3.14.2023
Analysis of the interest on the LOC
CDLX Research Notes: Update #142
Added on 3.15.2023
Analysis of the limit on the LOC from accounts receivable
CDLX Research Notes: Update #143
Added on 3.18.2023
Analysis of the new LOC covenants related to the Bridg earnouts and the dispute
Again, use this direct link to the section containing these updates, or see these updates at the bottom of this email.
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For convenience, I copied over the corresponding sections of the Research Notes and pasted them directly below.
The Updates:
(#144) 3.19.2023: Updated Liquidity Analysis, Future Share Count, Future Value Per Diluted Share
Following the $30M drawdown of the LOC, I wanted to update the liquidity analysis to see how well CDLX can handle the Bridg earnouts and dispute with only that amount of additional cash, then with the remaining LOC, and finally with issuing stock under the $100M shelf. The analysis below breaks out these actions to see the liquidity at each step.
Additionally, I wanted to see the resulting ending shares, and calculate the future value per diluted share under a very modest future state but with the significantly higher share count, to see if CDLX is still worth investing / owning after significant dilution (by comparing that future value per diluted share vs today’s stock price and finding the return).
I used many of the same scenarios as before, such as winning or losing the Bridg dispute.
Note, I did the calculations assuming 100% cash is used for the 2nd earnout. This has been hinted it, and I’ve used this method in the past.
The reason CDLX would do this is given the very lower VWAP, where you are issuing the max shares possible but getting very little benefit and practically paying near 100% in cash anyway.
So use cash now, have no additional dilution, and then issue shares later to build up a cushion (at which point CDLX should be FCF positive going forward).
I do all these calculations below.
I also made a video going over this section of the notes. This is an exclusive video for those of you with access to the Research Notes.
Directly below, if you have access, you will find all the calculations and you can watch the video where I go over all the calculations, as well as over each section in detail, explaining what this all means, and why this gives me a lot of comfort (and led to me buying more).